US embassy cable - 04PRETORIA4312

UNCLAS PRETORIA 004312 
 
SIPDIS 
 
DEPT FOR AF/EPS DKRZYWDA AND AF/S/TCRAIG 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWEL 
DEPT PASS USTR FOR PCOLEMAN AND WJACKSON 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV, ETRD, EFIN, ECIN, ECON, SF 
SUBJECT:  APPROVAL OF SNO LICENSE - AN EMPTY GESTURE? 
 
REFTEL:   A) PRETORIA 3943 
          B) PRETORIA 6384 
 
(U) This cable is sensitive but unclassified. Not for 
Internet distribution. 
 
1.  (SBU) SUMMARY. Minister of Communications Ivy Matsepe- 
Casaburri conditionally approved a license for the Second 
National Operator (SNO) on September 17.  The Independent 
Communications Authority of South Africa (ICASA) must now 
oversee negotiations to issue the license despite the lack of 
a shareholding agreement, business plan, and shareholders and 
subscription agreements.  While some SNO shareholders are 
optimistic about the announcement, Nexus (the SNO's 
empowerment shareholder) argues that nothing has really 
changed and is proceeding with its call for a judicial review 
of the SNO process.  END SUMMARY. 
 
2.  (U) As promised in her August 27 press conference, the 
Minister of Communication Ivy Matsepe-Casaburri approved a 
license for the Second National Operator (SNO) on September 
17.  Casaburri said the approval was subject to the following 
conditions:  a) acceptance of the shareholding and control 
structure of the SNO; b) finalization of and agreement on the 
Business Plan; and c) finalization of the Shareholders and 
Subscription Agreements.  The Minister has asked the 
Independent Communications Authority of South Africa (ICASA) 
to undertake the role of approving the applicants' 
submissions, including the shareholders agreement, business 
plan, and then the licensing of the SNO entity.  (NOTE: While 
South African law allows the Minister to approve a license, 
only the regulator can issue the license.  END NOTE). 
 
3.  (U) The Minister's August 27 announcement detailed 
changes to the shareholding structure and was also subject to 
the same conditions outlined in paragraph 2.  Although all 
the SNO shareholders have yet to accept the Minister's 
proposed shareholding structure, she approved the license 
anyway.  Industry stakeholders said that the Minister's 
approval of a license effectively places the burden of the 
SNO squarely on the shoulders of the regulator without 
actually resolving anything. 
 
4.  (SBU) A Nexus (the empowerment partner in the SNO) 
official told Econoff that since the Minister has yet to find 
a 26 percent shareholder for the strategic equity partner 
(SepCo) stake, nothing has really changed.  According to the 
official, ComuniTel and TwoConsortium, the two failed bidders 
from the tender process who were awarded a combined 25 
percent stake in SepCo, still remain in a position to control 
the SNO.  As a result, Nexus has renewed its call for a 
judicial review of the SNO process.  This process could 
derail the SNO for months. 
 
5.  (U) Nevertheless, some SNO stakeholders remain 
optimistic.  Karl Socikwa Transtel CEO and SNO official 
spokesperson said he is "cautiously optimistic" that the the 
Minister's announcement would make the SNO network available 
by early next year, in time to capitalize on the opening of 
the services market in February.  Deputy Minister of 
Communications Roy Padayachee also claims to have 
confirmation that Nexus will drop its legal action and that 
the SNO parties are moving forward.  To date there has been 
no public comment on the Minister's proposed shareholding 
structure or her approval of the SNO license. 
 
6.  (U) Meanwhile, industry stakeholders are anxiously 
awaiting the Minister's October press conference where she 
has said she will elaborate on the telecom liberalizations to 
take place February 1, 2005. 
 
FRAZER